Homework Answers
| a. | Date | Account titles and explanation | Debit | Credit | |||||
| Apr 30. | No entry | ||||||||
| June 1. | Cash dividend | (Note:1) | 1200000 | ||||||
| Dividend payable | 1200000 | ||||||||
| (Cash dividend declared) | |||||||||
| July 1. | Dividend payable | 1200000 | |||||||
| Cash | 1200000 | ||||||||
| (Cash dividend paid) | |||||||||
| Aug 1. | Stock dividend | (2000000*5%*19) | 1900000 | ||||||
| Common stock dividend distributable | (2000000*5%*0.5) | 50000 | |||||||
| Paid in capital in excess of par-Common stock | 1850000 | ||||||||
| (Stock dividend declared) | |||||||||
| Sept 10. | Common stock dividend distributable | 50000 | |||||||
| Common stock | 50000 | ||||||||
| (Stock dividend issued) | |||||||||
| Note:1 | |||||||||
| Dividend is declared on capital stock outstanding | |||||||||
| 2 for 1 stock split means 2 shares for 1 share | |||||||||
| Hence,the capital stock outstanding will double and par value will be half. | |||||||||
| Par value=1*0.50=$ 0.50 | |||||||||
| Capital stock outstanding=1000000*2=2000000 | |||||||||
| Dividend=2000000*0.60=$ 1200000 | |||||||||
| b. | Shares of capital stock outstanding: | ||||||||
| Shares | |||||||||
| Beginning balance | 1000000 | ||||||||
| Stock split | 1000000 | ||||||||
| Stock dividend | (2000000*5%) | 100000 | |||||||
| Total | 2100000 | ||||||||
| Shares of capital stock outstanding=2100000 | |||||||||
| c. | 2 for 1 stock split means 2 shares for 1 share | ||||||||
| Hence,the capital stock outstanding will double and par value will be half. | |||||||||
| Par value=1*0.50=$ 0.50 | |||||||||
| d. | Event | Effect on total stockholder's equity | |||||||
| Stock split | No effect | ||||||||
| Declaration and payment of a cash dividend | Decrease | ||||||||
| Declaration and distribution of a stock dividend | No effect | ||||||||
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